WD RECERTIFIED — HIGH QUALITY PRODUCTS AT A GREAT VALUE

Statements in these posted remarks that relate to future results and events, and other forward-looking statements in these remarks, are based on Western Digital Corporation’s current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties. These risk factors include:

the impact of continued uncertainty and volatility in global economic conditions;

supply and demand conditions in the hard drive industry;

uncertainties about the timeframe for the restoration of WD’s operations to pre-flood levels as well as associated costs for such restoration;

uncertainties concerning the availability and cost of commodity materials and specialized product components;

delays in or failure to obtain any required regulatory approvals with respect to WD’s planned acquisition of HGST, or failure to consummate or delay in consummating the transaction for other reasons;

actions by competitors;

unexpected advances in competing technologies;

uncertainties related to the development and introduction of products based on new technologies and expansion into new data storage markets;

business conditions and growth in the various hard drive markets; pricing trends and fluctuations in average selling prices; and other factors listed in our periodic SEC filings and on this website in Risk Factors.

Robert Blair - Investor Relations

I want to mention that we will be making forward-looking statements in our comments and in response to your questions concerning: the impact of the Thailand flooding, including its impact on industry demand in the next several quarters and the industry’s ability to meet that demand; charges and expenses in the March quarter related to the Thailand flooding; flood mitigation measures in Thailand; our insurance coverage; demand for storage in the long term; the return to pre-flood capacity levels by us, the industry and our supply chain; our internal slider production in Thailand and Malaysia; industry inventory; diversification of our supply chain and its impact on cost and pricing; our investments in development; the expected completion and the timing of our planned acquisition of Hitachi Global Storage Technologies; the timing and outcome of our motion to vacate the award entered against us in our arbitration with Seagate; our capital expenditure plans; and our financial results expectations for the March quarter, including unit shipments, revenue, gross margin, expenses, tax rate, share count, and earnings per share. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including those listed in our 10-K filed with the SEC on Oct. 28, 2011. We undertake no obligation to update our forward-looking statements to reflect new information or events, and you should not assume later in the quarter that the comments we make today are still valid.

In addition, references will be made during this call to non-GAAP financial measures. Reconciliations of the differences between the historical non-GAAP measures we provide during this call to the comparable GAAP financial measures are included in the investor information summary posted in the Investor Relations section of our Web site at www.westerndigital.com. The forward-looking guidance we provide during this call excludes charges and expenses related to the Thailand flooding and our planned acquisition of HGST. Because these charges and expenses are not known to us at this time, we are unable to provide guidance for, or a reconciliation to, the most directly comparable GAAP financial measures. The impact of these excluded items may cause the estimated non-GAAP financial measures to differ materially from the comparable GAAP financial measures.

I would also like to mention that due to daily changes in the industry supply picture and continuing evaluation of our Thailand flood losses and litigation exposures, our financial results for the December quarter are preliminary until we file our Form 10-Q for the quarter with the Securities and Exchange Commission. In addition, we expect additional flood recovery related expenses to be incurred in the March quarter, and it is possible that our fixed asset impairment estimates for the December quarter may have to be adjusted as the recovered assets are put into production.

As a reminder, until our acquisition of HGST closes, WD and HGST remain independent companies, so we will not be taking any questions about HGST’s business or financial performance. We ask that analysts limit their comments to a single question and one follow-up question. I also want to note that copies of remarks from today’s call will be available on the Investor section of Western Digital’s website immediately following the conclusion of this call.

John Coyne - President & Chief Executive Officer

Good afternoon and thank you for joining us on today’s call. With me are COO Tim Leyden and CFO Wolfgang Nickl. After my introductory remarks, Tim will provide an update on our operations and Wolfgang will review our Q2 financial performance and current outlook.

I am pleased to report that we have made substantial progress in our mission to restore our manufacturing capacity in the aftermath of the historic flooding in Thailand. This is reflected in our Q2 financial performance announced earlier today, the continued ramp of our Thai HDD production capacity and in the fact that we have now recommenced slider manufacturing, which had been suspended since October 10.

While much work remains to be done over the next several quarters to reach our pre-flood manufacturing capabilities, the progress thus far is ahead of our original expectations and is a tribute to the dedicated and effective actions of our employees, contractors and Thai government agencies, the efforts of our supply partners and the support of our customers. I want to thank all of those involved in this huge and extraordinary effort.

We believe industry shipments in the December quarter were about 119 million units which included approximately 11 million units of pre-flood inventory. Today, one quarter after the floods hit and despite the industry’s heroic recovery efforts, supply remains significantly constrained. We believe this condition will persist throughout calendar 2012 with gradual improvement during the year, with industry production in the June quarter approaching pre-flood quarterly build levels. However, with the expected uptick in demand in the back half of the year, rollover demand from the current shortages and inventories throughout the supply chain at record lows -- from component supply, through HDD and system-manufacturing and distribution and retail channels -- we believe the pipeline will not be refilled to normal levels until the first half of calendar year 2013.

We believe demand for storage for the long term continues to grow unabated. With the HDD industry’s remarkable flood recovery effort and the gradual replenishment of the inventory pipeline, we believe rotating magnetic storage will weather its recent challenges and remain the preferred and most cost effective solution to meet the demand for storage in high volume, mass-market applications — with no significant loss of share to competing technologies as we remain focused on innovating and creating compelling value for customers.

From a WD standpoint, we expect our own recovery to mirror the trajectory of the industry that I just outlined — with a return to pre-flood capacity levels in the quarter ending September and with our customers’ inventory pipeline replenished in the first half of calendar 2013. This pace of recovery is important as we focus on satisfying our customers’ needs and as we respond to their strong encouragement to resume our leading role in the industry.

To that end, our priorities are clear for calendar 2012:

First, we will continue to focus on restoring our manufacturing and supply chain capacity to pre-flood levels.

Second, in concert with our supply partners, we are establishing the most robust and resilient supply chain of critical HDD components, as we ramp our manufacturing capability back up.

Third, during the flood recovery period we have maintained our focus and investment in development to ensure that we will be in a position to offer new products with advanced technology to sustain our leadership as we ramp our post flood production.

We plan to achieve these goals with the same time-tested focus on high quality, low cost and crisp execution that has established WD as a trusted leader in the storage industry over the last dozen years. We believe that executing to this strategy and achieving the aforementioned priorities will prove to be a compelling value proposition for our customers as we compete for their future business.

Before turning the call over to Tim Leyden for a review of our operations and recovery effort, I want to comment on two additional matters: our plan to complete the acquisition of HGST and the pending litigation with Seagate. Our plan to complete the acquisition of HGST by March of this year is on track as we continue to work on obtaining the remaining approvals of the transactions from the respective government agencies. We remain very excited about the synergies of the acquisition and the advantages it will create for our customers.

On November 18, 2011, an arbitration award of $525 million was rendered against WD. Earlier today the arbitrator awarded pre-judgment interest in the amount of $105 million. WD will promptly file a petition to vacate the award on the grounds that the arbitrator exceeded his authority and failed to consider relevant evidence. We anticipate that the court will hear arguments on our petition in March or April 2012 and issue a decision sometime thereafter. While we can provide no assurances that we will be successful, we believe that if the court reviewing our petition correctly considers the law, the arbitration award should be vacated.

Closing Remarks
Thank you for joining us today and for your continued interest in WD. I want to again acknowledge the heroic effort by our employees and supply partners in helping us achieve the progress we have thus far and assure our customers and shareholders that we are working hard to return the company to its leadership position. Thank you very much.

Tim Leyden - Chief Operating Officer

In the aftermath of the Thailand flooding, our primary focus was to bring stability and predictability back to our operations by getting our disabled manufacturing locations and those of our affected suppliers back in operation as quickly as possible. With this overall objective in mind, we moved quickly to limit the disruption to our customers. We optimized our HDD availability through increased throughput from our Malaysian factory, increased the availability of external HGAs with assistance from SAE/TDK, re-engaged our previously idled Thailand employees to recover many of the inundated fixed assets and, once the flooding had receded, we re-started production in our dried-out factories on a limited basis. In addition to these operational initiatives, we took further action to remain profitable and minimize the impact on our working capital.

Our team responded magnificently to these challenges and I am pleased to report that we have made substantial progress on the journey back to achieving full pre-flood capacity by the third calendar quarter of 2012.

Our focus now is on accelerating our recovery and increasing availability to our customers.

At this point in time:

We are not constrained relative to HDD assembly or test.

We are still constrained by component availability – specifically sliders.

We are very pleased with the support we have been getting from SAE/TDK in providing both completed HGAs and processing WD’s raw wafers. Additionally, we are grateful for the expeditious recovery efforts of our mechanical and other suppliers who themselves were affected by the Thailand floods.

As of yesterday, we have completed our first batch of post flood sliders in our Bang Pa-In facility and we are working through qualification and expect to have a meaningful quantity of internally produced sliders shipping in our HDD products by the end of the current quarter.

We are enhancing our infrastructure by extending slider production capacity and capability into Malaysia in order to mitigate risk. We expect to have Malaysian sliders shipping in our HDDs in the June quarter.

The Bang Pa-In and Navanakorn industrial park landlords and the Thailand government are planning to reinforce and install flood barriers for these industrial zones and we intend to augment those with company specific initiatives.

We are working with our suppliers to diversify their manufacturing locations in order to reduce geographical concentration.

Supplier recovery is progressing well and we expect that suppliers will be substantially back to pre-flood run-rate levels by the June quarter.

We are maintaining the pace of product and technology development and though we have encountered challenges due to the flooding, we are focused on minimizing the impact. We are currently shipping 1 TB per platter 3.5-inch and 500 GB per platter 2.5-inch drives in volume. In accordance with our normal practice, the rate of deployment of those newer technologies is dependent on cost cross-over points at each capacity point. Additionally, I am pleased to report that we have our 900 GB 2.5-inch SAS product in qualification at multiple OEMs.

As we emerge from the aftermath of the flooding, we are mindful of coming back with a more robust supply chain model that seeks to disperse in-house and supplier risks across geographies and factory locations. This dispersal of volumes across a wider geographical area will contribute to some structural and logistical cost increases which should be recovered from customers in order to maintain the continuing investment required in what is a high-technology and capital intensive business. An unanticipated benefit of our recovery activities is that we are taking advantage of the downtime to improve process efficiencies and cycle-times.

Supply of HDDs is constrained at an overall industry level due to the supply chain disruption. From WD’s standpoint, we are allocating product to customers, segments and channels while attempting to maximize HDD availability through optimizing component utilization. We are taking current inventory positions – where known – into account as we respond to immediate customer needs, while at the same time paying attention to the fundamentals of running a viable profitable business - conserving cash and continuing to stay competitive technologically. As a result of balancing all these factors, you will note that, broadly speaking, the percentages of volume deployed to market segments and channels is different to what might be perceived as our more normal supply profile. In general, channels with shorter inventory pipelines are getting higher and more immediate product allocations while channels with longer inventory pipelines are expected to deplete available inventory before receiving further product allocation. This methodology was, and is, being deployed with the intent to maximize the availability of HDD products to the end customer within the shortest time horizon. As a result we shipped 9.8 million notebook drives, 11.4 million desktop, 2.4 million CE, 3.2 million branded and 1.7 million enterprise units into the marketplace during the December quarter.

I will now comment on expected industry supply/demand conditions for the current quarter and the balance of calendar 2012. We expect demand to again significantly exceed supply during the March quarter and to add to the net supply deficit that occurred during the December quarter. We estimate that supply in the March quarter will be back-end loaded as component availability improves and that there will be further depletion of inventory in each of the segments and channels leading to better clarity around supply/demand positions as the quarter unfolds. WD’s HDD production will continue to be constrained by component availability.

In contrast to the December quarter where inventory buffers in all sectors of the supply chain somewhat mitigated the HDD shortage – as evidenced by the PC OEM units being only modestly down from expected volumes, most of that excess inventory has now been extracted and inventory levels are extremely low. These depleted inventory levels coupled with any rolled-over demand as a result of the December and March quarterly supply deficits mentioned above, the additional prospect of increasing seasonal demand in the back half of the year and the value proposition from the emerging ultrabook and Windows® 8 introductions will mean that HDD supply will struggle to match demand through calendar year 2012. Consequently, we do not expect meaningful inventory replenishment until the first half of 2013.

In WD’s case, we are targeting throughput to approach 60%, 80% and 100% of pre-flood production volumes in the March, June and September quarters respectively.

I will now turn the call over to Wolfgang for commentary on fiscal Q2 and our forecast for fiscal Q3 2012.

Wolfgang Nickl - Senior VP Finance & Chief Financial Officer

As a reminder, a summary of historical financial information has been posted to the Investor Relations section of our website. In my remarks, I will first summarize our financial performance for last quarter, and then I will provide a range of expected financial results for the March quarter.

For the December quarter, revenue was $2.0 billion, down 19 percent from the prior year and 26 percent from the September quarter.

We shipped a total of 28.5 million hard drives as compared to 52.2 and 57.8 million for the year-ago and September quarters, respectively. In excess of 3 million units that we shipped to customers during the December quarter were manufactured in the prior quarter.

Hard drive average selling price was approximately $69 per unit, up $22 from the year-ago quarter, and up $23 from the September quarter.

There were two customers which each comprised 10 percent or more of our total revenue: Acer and Dell.

OEM sales represented 59 percent of revenue, up from 45 percent in the prior year and 53 percent in the September quarter. Distribution channel sales represented 25 percent of revenue, down from 33 percent in the prior year and 29 percent in the September quarter. Retail sales as a percent of revenue was 16 percent, down from prior year’s 22 percent and September’s 18 percent. Revenue from sales of our branded products was $328 million, down 40 percent from the year-ago quarter and 33 percent from the September quarter. As Tim mentioned earlier, we deliberately allocated production output by balancing immediate customer needs with prevailing inventory positions.

Our gross margin for the quarter was 32.5 percent, up from 19.2 percent in the year-ago quarter and 20.1 percent in the September quarter. The increase in gross margin is a result of higher ASP's, partially offset by higher costs per unit. On average, per-unit costs were approximately $10 higher than in the September quarter due to lower production volume, increased use of airfreight, a higher mix of externally procured heads, and higher costs for other components as a result of the flood’s impact on ourselves and our supply chain partners.

R&D and SG&A spending totaled $287 million in the December quarter as compared to $235 million and $282 million in the year-ago and September quarters, respectively. SG&A included $11 million of acquisition related expenses in the December quarter and a total of $18 million in acquisition and unrelated litigation accruals in the September quarter. Excluding these items, R&D and SG&A would have totaled $276 million, $235 million and $264 million in the December, year-ago and September quarters, respectively. The increase in total R&D and SG&A is due to higher spending on development and marketing of new products, particularly in the branded and enterprise areas, and higher incentive accruals.

Expenses for the December quarter also included $199 million for charges and expenses related to the Thailand floods. These costs consist of $109 million of fixed asset impairments and $90 million for damaged inventory, recovery and remediation services and wage continuation. This does not include any offset for potential insurance recoveries.

The company, as we have previously stated, carries property and business interruption insurance. Discussions with our insurance carriers are moving forward but the claim process is still in its early stages.

Net interest and other non-operating expense was $2 million, including $3 million of commitment fees on the credit facility related to the pending acquisition of Hitachi’s drive business.

Tax expense for the December quarter was $15 million, or 9.4 percent of pre-tax income.

Our net income for the December quarter totaled $145 million, or $0.61 per share, as compared to $225 million, or $0.96 per share, for the year-ago quarter and $239 million, or $1.01 per share, in the September quarter. The December quarter included $199 million for charges and expenses related to the Thailand flood and $14 million for acquisition-related operating expenses and bank commitment fees, whereas the September quarter included a combined $21 million for acquisition-related expenses, bank commitment fees and unrelated litigation accruals. Excluding these items, non-GAAP net income for the December quarter totaled $358 million, or $1.51 per share, as compared to $225 million, or $0.96 per share, in the year-ago quarter and $260 million, or $1.10 per share, in the September quarter.

As John indicated in his remarks regarding the arbitration award, we intend to promptly file a petition to vacate. We believe that if a court correctly considers the law, the award should be vacated. As a result, we have not made an accrual for the award in the December quarter.

Turning to the balance sheet, our cash conversion cycle for the December quarter was a positive 5 days. This consisted of 34 days of receivables, 31 days of inventory, or 12 turns, and 60 days of payables. Once we realized the extent to which our production was impacted, as well as the impact to our key suppliers, we shortened payment terms with our customers and directed more cash to our strategic component and equipment supply partners in order to stabilize the supply chain and support a quick recovery. I would note, that we did not accept pre-payments from our customers and pre-payments to suppliers were not material.

We generated $378 million in cash from operations during the December quarter, and our free cash flow totaled $258 million.

Capital spending for the December quarter totaled $120 million. December quarter disbursements were for assets that were ordered prior to the floods. Depreciation and amortization expense for the December quarter totaled $140 million. Recovery capital received during the December quarter was not significant, as the lead time for such items is several months. March quarter capital spending will include a significant amount of replacement capital. The total amount of capital spending we will incur during calendar 2012 to restore our capacity to pre-flood levels and increase the robustness of our supply chain is approximately $650 million.

We expect capital spending for fiscal 2012 to be between $750 and $800 million, inclusive of recovery capital. This was accomplished by reallocating much of our original capacity capital to recovery capital. Capital spending for technology-related assets continues as originally planned.

We made a $31 million debt repayment during the December quarter, and thereby reduced our debt balance to $231 million.

We exited fiscal Q2 with cash and cash equivalents of $3.9 billion, an increase of
$249 million from the September quarter. Approximately $3.2 billion of our ending cash balance was off-shore.

Let me now provide some context for our guidance for the March quarter.

Despite the heroic efforts of our employees and suppliers resulting in the recommencement of operations in both drive and slider factories, our March quarter output will be significantly constrained, and we expect to ship
between 31 and 33 million drives.

Total demand for the quarter is expected to significantly exceed industry supply capabilities.

We expect that our pricing will continue to be significantly above pre-flood levels due to the supply-constrained environment, under-absorption of our manufacturing assets and higher component costs.

Average costs will not improve significantly quarter-over-quarter. While we will have greater output and therefore less impact from fixed cost absorption, we do not have the benefit of mixing in pre-flood, lower cost inventory.

With respect to operating expenses, we will continue to invest in growth areas such as our Enterprise, SSD and Branded Products businesses.

Our March guidance does not include acquisition-related expenses or charges and expenses related to the flood.

In relation to expenses related to our flood recovery efforts, we expect to incur about $50 million, consisting primarily of ongoing reclaim and recovery work, and wage continuation for idled workers.

With these factors in mind, our March quarter guidance is as follows:

We expect revenue to be in the range of $2.0 billion to $2.15 billion.

R&D and SG&A spending will be approximately $275 million, excluding acquisition and flood -related expenses.

We expect our tax rate to be in the middle of our 6-9 percent business model.

We anticipate our share count to be approximately 239 million.

Accordingly, we estimate non-GAAP earnings per share of between $1.15 and $1.45 for the March quarter, which excludes acquisition and flood-related expenses.